Essentials Over Extras: Inflation Is Redefining Cardholder Spend

Americans are leaning on their credit cards to make purchases of essential items like groceries and gasoline in the face of rising inflation, according to a new survey from TD Bank.

The results of the survey underscore how vital it can be for credit card issuers to regularly assess whether the benefits they offer on card programs align with consumer payment practices. 

The annual inflation rate in the U.S. came in at 3% this past January, although it fell to lower levels in the months that followed. But the rate accelerated to 2.9% in August, which is the highest it had been since the beginning of the year.

The uptick in prices has impacted the spending behaviors of 90% of the people who responded to TD Bank’s survey. 

One of the more surprising takeaways from the survey, which polled more than 1,000 adults in the U.S. who own a credit card, is that people across a range of incomes say they are dealing with the impacts of soaring prices.

In August, the annual inflation rate in the U.S. shot up to its highest level since the beginning of the year.

Among respondents with a household income greater than $100,000, 84% reported that inflation was impacting them. That number grew only slightly, to 88%, for people with household incomes of less than $50,000.

Chris Fred, Head of Credit Cards and Unsecured Lending at TD Bank, said in the report on the survey that people are encountering a lot of uncertainty at this time.

“The cost of living continues to rise, making it even more important to have a good grasp on your finances and the tools available to you,” Fred said.

Credit card issuers can help cardholders gain the knowledge Fred referenced in his remarks.

Slightly less than half of the people who took part in TD Bank’s survey said their spending on groceries has increased more within the last year than their expenses on any other single category. 

Another 10% of respondents cited gasoline as the category where they’ve increased their spending the most over the past year.

Survey respondents said the credit card benefit they value the most is rewards, which trumped other features such as fraud protection and low interest rates. And more people may seek rewards cards if inflation continues to climb.

Only 4 in 10 survey respondents said they feel optimistic about where the economy is headed.

Many credit card issuers offer rewards programs that allow cardholders to earn points or cash back when they use their cards for purchases at grocery stores and gas stations. Issuers that don’t offer such benefits may have time to revamp their rewards structures to capitalize on shifting consumer spending patterns.

Only 40% of the respondents to the survey reported feeling optimistic about the economy. The other 60% said they are either pessimistic or neutral about the economic outlook in the U.S.

“We’ve found time and time again that when inflation is taking a toll, consumers value flexibility and cash back rewards from their credit cards,” Scott Adamo, Head of U.S. Franchise Unsecured Lending at TD Bank, said in the company’s report. “The right credit card can really help when budgets are tight.”